Did You Inherit An IRA? Call The IRA Custodian For Help

- Advertisement -


- Advertisement -

If you are a beneficiary of someone’s IRA (Individual Retirement Account), what do you do if the IRA owner dies?

To learn how to handle a deceased owner’s IRA, the main contact is IRA custodian, the firm that “custodians” the IRA. (You can find the custodian’s name on the IRA statement.)

Time

- Advertisement -

Many times, when a loved one is lost, it is not clear exactly where to turn for advice, but it is especially important information if action needs to be taken quickly. In the case of an inherited IRA, action may need to be taken before December 31 of the year of death. This action begins when the decedent did not withdraw 100% of their RMD (Required Minimum Distribution) in the year of death.

If you are a beneficiary, what should you do?

I reached out to Vanguard, which has nearly 8 million retail customers in the US, for some practical advice.

confusing at first glance

First, let me share an important insight from Vanguard:

“For many clients inherited retirement assets, RMDs are new and quite confusing at first glance. Whether a client is seeking assistance with a change of ownership due to a death process, or about an RMD after the transition is complete At Have Questions, we have experts who can help answer their questions, and resources online to help explain their options in ‘plain talk’ terms.”

Actually, RMDs for inherited IRAs are a very complicated topic.

where to get information

Whether or not you are a Vanguard IRA client, you will benefit from reading Vanguard RMD Rules for Inherited IRAs Page. There you’ll find a description of the RMD and RMD calculation methods for an inherited IRA. Similarly, you might want to read “Fidelity’s Processes Here”Inherited IRA: Know Your ChoicesThese resources will give you some idea of ​​what to expect. But of course, you’ll want to follow the procedures of the IRA custodian handling your situation.

Example

Let’s say you are a beneficiary of your father’s Vanguard IRA, who died earlier this year. What happens if you call an IRA custodian like Vanguard?

To report the death of an IRA owner, a beneficiary needs to identify the decedent’s name, the last four digits of his Social Security number, and the address on record.

Vanguard, in turn, will attempt to verify that the person has died using its own system, but if it is unable, it will ask the beneficiary to upload a digital copy of the certified death certificate .

Only then can Vanguard, in its capacity as the IRA custodian, begin the process of transferring the deceased owner’s IRA to the beneficiary as an inherited IRA. However, if the beneficiary is a spouse, there is another option — the survivor can treat the deceased’s IRA as his own. Don’t do this without the help of your tax advisor.

(Note that in cases where the owner has not named a beneficiary, Vanguard will need to obtain notification (certified letter of intent) of the person who may act on behalf of the property.)

detailed instructions Inherited a Vanguard account can be found here, Note that once the transfer process is initiated, the account will be frozen “to protect against unauthorized activity” until the transfer is completed to the beneficiary.

Last RMD in the year of death

Once an IRA owner passes away, Vanguard will guide its IRA clients through the change-of-ownership process to acquire any assets that the beneficiaries are entitled to. Then, the beneficiary or beneficiary can proceed to satisfy any remaining outstanding RMDs of the deceased IRA owner.

Vanguard notes that when someone dies at the end of the year, it is likely that accounts will not be converted in time to satisfy the decedent’s remaining RMDs for that year. In these situations, Vanguard generally recommends that customers satisfy the remaining RMDs as soon as possible and work with a tax professional to explain to the IRS why the RMDs were not satisfied before the year-end deadline. See my last post on this topic with a discussion of IRS Form 5329 and how to request a waiver of the 50% penalty for missing RMDs.

multiple beneficiaries

What if multiple beneficiaries are named by the IRA owner? Provides personalized service for Vanguard each Beneficiaries, therefore it would be advisable that every beneficiary should approach Vanguard. pawn offers a specialized online tools For the beneficiaries to answer a few questions, which in turn will help determine whether they can complete the process online or will they need to consult a Vanguard specialist.

If there is a remaining RMD for the year of the decedent’s passing, it can be satisfied by one beneficiary or by several, with the beneficiaries determining how to meet the RMD.

important reminder

As always, when dealing with complex issues like RMDs and inherited IRAs, be sure to consult with a tax advisor about the approach you should take given your particular situation. Taxes are unique to the individual.

questions?

To keep up with the topics I cover, make sure Follow Me on the Businesshala.com site. write me here [email protected], Include your city and state and mention that you are a Businesshala.com reader. While not all questions can be answered, each email is read and reviewed and may be discussed in future posts.

,

- Advertisement -

Stay on top - Get the daily news in your inbox

DMCA / Correction Notice

Recent Articles

Related Stories

Stay on top - Get the daily news in your inbox